Richard Cordray as CFPB Director is No Better than Elizabeth Warren

After a year of dithering, on Monday, July 18, President Obama finally nominated someone for the Consumer Financial Protection Bureau (CFPB) directorship—and surprise, surprise, it is not Elizabeth Warren, the chief architect of the CFPB.

After months of turning Elizabeth Warren into the Saruman of the regulatory world, Republicans have at least succeeded in ensuring she won't take full control of the bureau on July 21.However, the alternate, Richard Cordray, shouldn't make conservatives, government skeptics, or consumers jump with glee.

Cordray, currently the CFPB Director of Enforcement, is a staunch ally of Elizabeth Warren.So, while she may not be the titular head of the agency, don't think for the minute that she won't be influencing the direction of the agency.Yet, the ghost of Elizabeth Warren won't be the only aspect influencing the new federal regulator—Cordray, in his own right, has a history of pro-government interventionist policies.

After a stint as a clerk for Supreme Court Associate Justices Bryon White and Anthony Kennedy—not exactly allies of limited government and personal responsibility—and one term representing Ohio's 33rd Congressional District, Cordray was appointed to the newly created Ohio Solicitor General position.

As state Solicitor General, Cordray argued Household Credit Services v. Pfennigin the U.S Supreme Court, a case in which Household Credit Services was accused of inappropriately charging Sharon Pfennig an overcharge fee denoted under "purchases" versus "finance charges" on her credit card bill.While Household Credit Services claimed they categorized the charge correctly based on the Federal Reserve's definition, Pfenning claimed that the definition interpretation was misleading.The Supreme Court eventually upheld the lower court's ruling that the definition interpretation was sufficient and clear.However, this case provides a glimpse into Cordray's pro-government regulatory approach to "protecting" consumers—despite the fact that Pfenning had gone over her $2,000 credit limit and maintained her overage for months and Household Credit Services was completely within its rights to charge an appropriate fee, he still went after the company with a vengeance.

Cordray then progressed to the Ohio Treasurer's office following a failed Senate candidacy and subsequently elected, in 2008, Ohio's Attorney General. (Note, while Treasurer, Cordray institute a state real property inventory system that Reason Foundation has praised as a model for responsible stewardship of public lands and buildings.)

As Ohio's AG, he sued Bank of America on behalf of Ohio's largest public employee pension program over allegations that BofA concealed information regarding their Merrill Lynch acquisition.His crusade against Wall Street on behalf of the "common" person continued with cases against AIG and others in a bid rigging case—AIG paid a hefty settlement, but has denied any wrongdoing.

Cordray again found himself without a job after losing his AG re-election to former Ohio Senator Mike DeWine in November 2010.However, his unemployment did not last long, as Elizabeth Warren hired Cordray on December 15, 2010 to serve as her chief regulation enforcer.Cordray described his new position as a prime opportunity to continue his AG activities on a national level "with more robust and more comprehensive authority" suggesting he firmly believes in the "Warren doctrine" that the CFPB has unprecedented, over-arching authority and powers.

It does remain to be seen if Cordray, or anyone for that matter, will really become Director of the CFPB.In May 2011, 44 of the 47 Republican Senators signed a letter to President Obama declaring they would prevent the confirmation of any CFPB director nominee unless the directorship is converted to a commission and brought under the federal appropriations process like nearly all regulatory bodies.Those 44 Senators have the ability to prevent Cordray from ever putting CFPB Director on his business cards or email signature and so far have not indicated they will back down from their letter.

The Republican opposition stems from the fact that the CFPB directorship is problematic on multiple levels. It gives a singular President entirely too much power to dictate regulations that in essence are extra-legislative laws, thus giving the President direct legislating ability. The current structure gives the Director too much authority to determine the breath of the CFPB's actions without any check and balances. And the budget CFPB has through the Fed requires no Congressional approval.

Ironically, the Democrats seem to be overlooking a future time when the Republicans have the presidency and can nominate their own CFPB head, potentially to gut the agency. And perhaps more devious Republicans would prefer the current structure so they can bide their time until the White House is back in their hands to address CFPB problems.

But ultimately, the current Republicans have the right idea—if they cannot eliminate the CFPB completely, which would be the best option, converting the leadership to a multi-person commission, like every other regulatory body, will help ensure appropriate, balanced, and checked regulations. Nothing against Richard Cordray personally, but his nomination, while a battle victory for the GOP and limited government allies, is not the end of the war on over-burdensome government regulation.

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Ammar said...
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Here's a little trap I hadn't heard of borefe, though I'm sure it is in the fine print somewhere. I was leaving Costa Rica on Feb. 5, 2011 and paid their airport/tourism tax of $26.50 at then current exchange rates with my Bank of America Upromise Mastercard only for convenience. A cash advance fee of $10 was unexpectedly added to the transaction three days later (along with the customary 3% they usually charge retailers on sales and services)for a total charge $34.35) which I expected. The unexpected additional $10 brought the total amout of the transaction to $44.35, a whopping to my mind nearly 50% in service and interest charges. When I called to inquire about this with their Customer Service, the woman, who was very nice, informed me that they added this fee if the vendor, in this case the Costa Rican airport authority, processed the transaction as a cash advance instead of a credit transaction. Of course they can, I suppose, but without warning the consumer of the additional charge? And while the young woman was willing to credit my account back as a one time courtesy, based on my excellent record with them, to avoid the charge in the future I was advised I would have to avoid the use of the card with this vendor. But the credit did not appear until February 11th. As it happens, my wife had to leave Costa Rica to renew her tourist visa, and took a flight to Panama on the 10th returning on February 13th. She too, was charged; without notification. Thus, by the time that I had resolved my issue with Upromise, I was charged again, because I had not alerted her to the effect of using the credit card with the authorities considering a cash advance, thus triggering the same fee I had originally complained about. I realize this is small potatoes in the mix of things you will have to regulate. However I believe that it is incumbent on someone either the card company or the vendor to alert the consumer as to exactly what is being purchased in this case the exit tax plus the customary service charge plus the cash advance fee. Thank you for your attention we will henceforth avoid the use of a credit card for the payment of such transactions, but I thought you should know about this, to my mind, trap. Peace, and good luck with the impossible task set borefe you. Your voice was one of the few Cassandras speaking about the gouging of the American consumer in the lead up to the credit bubble and financial crisis of 2008. Thank you.